Financial Terms: What is Insider Trading? How Does it Affect the Business Module?

Financial Terms: Insider trading is the illegal practice of purchasing or selling stocks using confidential, non-public information that can impact a company’s stock price. This usually happens when an individual gets access to confidential information, such as financial reports or planned commercial transactions, that is not yet available to the broader public or other investors. Using such information for personal gain is against the law in India. However, if the knowledge is made public, it no longer counts as insider trading. Individuals who engage in insider trading or “tipping” others with secret information may face harsh consequences, including large fines or jail. 

What is Insider Training?

The Securities and Exchange Board of India (SEBI) monitors and enforces insider trading prohibitions. If a corporation withholds key information that could affect stock prices, this may be called insider trading. To ensure fair and transparent trading, corporations are encouraged to make key information public. Investors should avoid insider trading and always trade within legal limitations. Watch the full video to understand how some people profit from insider trading in the stock market and why it is illegal.